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Property market trends in 2016

Predicting property market trends is never easy but with the best available information we can highlight some factors that will influence the UK property market in 2016.

The saying goes “if America sneezes, we catch a cold”, so the decision decision of the US central bank, the Federal Reserve, to raise interest rates in December 2015 for the first time since the summer of 2006, has opened the door for the Bank of England finally to follow suit. The December hike was the first time in almost a decade that the Fed has raised interest rates.

This appears to be a deliberate Government to redress the balance with regard to first time buyers who have been crowded out of the market by second home owners and buy-to-let landlords.

“The government is very motivated to reverse the trend in owner-occupation – this is now a very important part of the government’s housing strategy,” says Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics).

“Buy-to-let landlords have had a very good run – holding property has been a very lucrative investment, so if the government has to squeeze the buy-to-let landlord it will take that in its stride.”

Will mortgage rates rise?

It is almost seven years since the Bank of England slashed interest rates to a record low of just 0.5%. That was the end point of a series of emergency cuts, designed to stave off financial Armageddon in the wake of the great banking crisis.

Since then, most economists have persistently forecast that rates would start rising again, probably within 18 months.

Every year these forecasts have been wrong, so will 2016 be any different?

For its part, the Bank of England continues to sit on the fence, effectively saying “wait and see”. While the world economy falters there is likely to be a cautious approach taken.

But one leading commentator, Ray Boulger of the mortgage brokers John Charcol, predicts some turbulence in the early months of 2016. He reckons that some people will rush to purchase buy-to-let properties before the higher stamp duty rates take effect.

“Those people who want buy-to-let properties are clearly going to be incentivised to complete before 31 March,” he says.

“Till then I think we will see some quite strong growth in prices, then I expect to see prices falling for the next few months as that element of demand is taken out of the market.”